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Foundations In Financial Planning SM Professional Education Program

Foundations In Financial Planning SM Professional Education Program. Module 8 Introduction to Insurance. Learning Objectives. 8–1: Describe types of personal risk. 8–2: Identify risk management techniques used in a situation.

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Foundations In Financial Planning SM Professional Education Program

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  1. Foundations In Financial PlanningSM Professional Education Program Module 8Introduction to Insurance

  2. Learning Objectives 8–1: Describe types of personal risk. 8–2: Identify risk management techniques used in a situation. 8–3: Analyze a situation to determine the method of risk management used. 8–4: Describe rules of risk management. 8–5: Define components of an insurance policy or an insurance term. 8–6: Distinguish between the functions of insurance agents and insurance brokers. 8–7: Describe characteristics of various forms and coverages in the homeowners series. 8–8: Describe terms or characteristics of a Personal Automobile Policy (PAP). 8–9: Describe characteristics of umbrella liability coverage.

  3. Questions To Get Us Warmed Up

  4. Types of Personal Risk • Loss of income • Unemployment • Disability • Death • Divorce • Catastrophic losses

  5. Risk Management Techniques • Risk retention • Risk avoidance • Risk reduction • Risk sharing • Risk transfer

  6. Rules of Risk Management • Don’t risk more than you can afford to lose. • Consider the odds. • Don’t risk a lot for a little.

  7. Four Types of Pure Risk • Personal • Property • Liability • Failure of others

  8. Criteria for an Insurable Risk • Law of large numbers • Accidental loss • Definite and measurable loss • Loss must not be catastrophic

  9. The Insurance Contract Four legal requirements • Legal activity • Offer & acceptance • Consideration/payment • Competent parties Contract terms • Insurable interest • Aleatory • Unilateral vs. bilateral • Indemnity • Contract of Adhesion

  10. Insurance Policy Components • Declaration • Insuring agreements • Exclusions • Conditions • Riders • Endorsements

  11. Types of Insurance Companies

  12. Agents & Brokers

  13. Types of Insurance • Life • Medical • Disability • Long-term care • Property • Liability

  14. Homeowners Perils Covered Basic coverage • 11 perils Broad form coverage • same as basic + additional perils Open perils coverage (formerly all risks) • all perils unless specifically excluded

  15. Types of Policies

  16. Automobile Insurance Policies • Part A: liability coverage • Part B: medical payments • Part C: uninsured motorist coverage • Part D: coverage for damage to your automobile • Part E: duties after an accident or loss • Part F: general provisions

  17. Umbrella Liability Coverage • Protects against both automobile and general liability • Is coupled with a minimum amount of liability coverage in both as a base amount • homeowners and automobile policies

  18. Question 1 A worker wearing a hard hat on a construction site represents which of the following methods of risk management? • risk tolerance • risk avoidance • risk reduction • risk transfer

  19. Question 2 Which of the following are considered to be rules of risk management? • Don’t risk a lot for a little. • The loss must not be catastrophic. • Don’t risk more than you can afford to lose. • Consider the odds of the event occurring. • I only • I and III only • II and IV only • I, III, and IV only

  20. Question 3 Charlie Bucket is interested in insuring against a number of risks he sees around him that cause him concern. Which one of the following would be considered an insurable risk? • his neighbor’s house • his fiancé’s life • his boss’s automobile • his son’s second grade teacher

  21. Question 4 JoAnna Jett has asked you to explain the different types of life insurance companies and life insurance policies. As JoAnna’s insurance advisor, which of the following will you tell her? • A mutual company can never sell a non-participating policy. • A stock company can never sell a participating policy. • A mutual company can sell a non-participating policy. • A stock company is owned solely by the policy holders.

  22. Question 5 Sam Smith has an insurance policy that he took out when he bought his home for $100,000 five years ago. At the time, Sam purchased enough property insurance coverage to meet the 80% coinsurance requirement with a $1,000 deductible. Today, with the original amount of insurance still in force, his home is valued at $150,000. This morning Sam had a kitchen fire that caused $15,000 worth of damage. As the adjuster, what are you able to tell Sam when he asks how much he will be paid? • $9,000 • $10,000 • $12,000 • $14,000

  23. Question 6 Which one of the following ISO policy forms increases the coverage on personal property from broad coverage to open-perils coverage on an HO 00 03 policy? • HO 00 04 • HO 00 06 • HO 00 07 • HO 00 15

  24. Question 7 Your client, John Jones, has an auto policy with a 100/300 split limit of liability. John caused an accident with another vehicle in which four other people were riding. Each of the four were injured and acted to bring suit against John for $100,000 each. John’s insurer defended the suit at a cost of $18,000. What is the maximum amount that Jon’s policy will pay for this claim? • $100,000 • $300,000 • $318,000 • $418,000

  25. Foundations In Financial PlanningSM Professional Education Program Module 8End of Slides

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